How can I calculate the value of the pre-tax benefit of contributing to my 403(b) plan through my employer?

I am considering leaving this employer and want a value for how much this is worth in case I take a job with an employer that does not offer a 401(k) type plan and I have to start contributing after tax income only.

Our financial system has a calculator that shows the effect of changing variables like contribution amount, # of withholdings, etc on my take home pay. But how do I calculate how much extra I would have to earn to take home an extra amount equal to the amount that is currently going into my 403(b)?

I can't tell if this is a super simple calculation or not. Thanks!

  • 2
    If your prospective employer does not offer a 401k plan at all, you can make IRA contributions; for which the limits are much smaller than what can be contributed in a 401k plan. So what you do lose is not just the immediate tax benefit of shielding lots of current income from income tax (it will be taxed when withdrawn) but also the tax deferral on future earnings until you retire a long time later. So, it is not just the current equivalence that you should be concerned about but also about the weight of income taxes in future years on the growth in your non-tax-sheltered retirement funds. Jun 20, 2013 at 21:24

1 Answer 1


To first order, and in the short term, just look at your marginal tax rate. If you put $100 pre-tax into a 403b/401k, and your marginal tax rate is 15%, you need to earn 100/(1-0.15) = 117.65 taxable dollars in order to save the same $100 in a taxable account and have money left to cover the taxes. (Note that the denominator is 1 minus the marginal rate.) The calculation becomes slightly more complex if your contributions are actually lowering your marginal bracket, but then just break it up into parts for each bracket (to a first approximation).

Calculating the effect of cap gains and dividend taxes along the way vs tax deferral followed by regular income tax, is more complicated and depends on a lot of things. Making use of Traditional and/or Roth IRAs can simplify the calculations somewhat (especially the Roth, which has zero tax liability on gains).

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